SNB Signals Willingness to Revive Negative Rates as Franc Strengthens

Schlegel: Negative Rates Back on the Table

Speaking in Zurich on Tuesday, Chairman Martin Schlegel admitted the Bank “doesn’t like” sub‑zero rates but is “certainly prepared” to deploy them again if disinflation persists. Price stability, he stressed, remains the paramount mandate regardless of market unease.

Swiss Franc’s Safe‑Haven Rally Complicates Outlook

Recent risk‑off flows have lifted CHF to multi‑year highs, cheapening imports and adding downward pressure on prices—good for shoppers, painful for exporters. Schlegel reiterated the SNB’s readiness to intervene in currency markets should franc appreciation threaten its inflation goal or squeeze Swiss manufacturers facing soft foreign demand.

Market Implications for CHF Pairs

* USD/CHF: Hovering near 0.82; a surprise June cut could open 0.80, while FX intervention risk caps rallies toward 0.84. * EUR/CHF: Stable around 0.93; deeper negative‑rate guidance may test 0.90, but any SNB buying of euros would limit downside. * Carry trades: Re‑introduction of negative rates would revive CHF‑funded strategies, potentially amplifying volatility in risk assets.

Key Takeaway

With inflation on the brink of slipping below target and the franc’s strength intensifying deflationary forces, the SNB is signalling full readiness to cut rates back into negative territory and step into FX markets—reaffirming the Swiss franc’s central role in the monetary‑policy toolkit.